If you own more than one dividend stock, invariably it will be a bank. The banks generally are money makers – their large retail base gives them access to low cost money which is lent out in higher cost money, the only exception is when the loan losses go to high or think financial crisis. Banks are an excellent stock to collect dividends from. But which one should you buy? Wells Fargo is the biggest bank in the world by market capitalization (share price times number of shares outstanding), the smaller ones can give better overall returns, whatever you pick start similar to the example below:
Mr. Bowman of Wickham Investment Counsel did an analysis looking for the biggest and most efficient banks.
First we narrowed the field to over $ 5 billion in market capitalization.
Second, Tier 1 capital is a measure of the bank’s strength – the higher the better but must be over 6%.
Efficiency ratio shows the percentage of dollar needed to produce $1 in return.
A low number of non-performing assets or loans with greater than 90 day payments frequency.
North American banks ranked by efficiency ratio
| Name | Ticker | Market Cap ($-bil) | Tier 1 Capital to Risk-Weighted Assets (%) | Efficiency Ratio % | Non-Performing Assets to Total Assets (%) | Short Interest Ratio | Dividend Yield % | 1-yr % return |
|---|---|---|---|---|---|---|---|---|
| M&T Bank Corp. | MTB-N | 15.42 | 10.62 | 50.2 | 1.26 | 11.06 | 2.35 | 40.45 |
| US Bancorp | USB-N | 68.97 | 11.1 | 51.68 | 0.64 | 1.66 | 2.18 | 12.91 |
| Fifth Third Bancorp | FITB-Q | 17.52 | 11.07 | 52.29 | 0.93 | 2.75 | 2.23 | 41.48 |
| First Republic Bank | FRC-N | 5.66 | 13.52 | 54.78 | 0.17 | 1.57 | 0.98 | 32.97 |
| Bank of Nova Scotia | BNS-T | 68.3 | 10.7 | 55.86 | 0.48 | 6.5 | 3.89 | 16.9 |
| CIBC | CM-T | 29.99 | 12.4 | 56.27 | 0.43 | 9.06 | 4.8 | 12.75 |
| Wells Fargo & Co. | WFC-N | 237.27 | 12.14 | 56.8 | 1.46 | 1.82 | 2.22 | 33.86 |
| Royal Bank of Cda | RY-T | 91.38 | 11.2 | 57.88 | 0.1 | 8.14 | 3.66 | 28.88 |
| National Bank of Cda | NA-T | 12.42 | 11.4 | 58.8 | 0.19 | 9.29 | 4.1 | 8.86 |
| BB&T Corp. | BBT-N | 24.88 | 11.3 | 58.81 | 0.7 | 2.12 | 2.43 | 12.73 |
| JPMorgan Chase | JPM-N | 213.33 | 11.6 | 59.77 | 0.45 | 1.72 | 2.26 | 67.53 |
| PNC Financial Svcs. | PNC-N | 40.9 | 12 | 59.92 | 1.24 | 2.58 | 2.13 | 29.15 |
| Citigroup Inc. | C-N | 160.29 | 13.3 | 60.24 | 0.54 | 0.71 | 0.08 | 97.09 |
| TD Bank | TD-T | 78.69 | 10.8 | 60.43 | 0.31 | 10.96 | 3.49 | 13.07 |
| Bank of Montreal | BMO-T | 40.67 | 11.3 | 61.76 | 0.51 | 9.89 | 4.41 | 16.29 |
| Regions Financial | RF-N | 14.7 | 12.38 | 64.18 | 1.49 | 0.75 | 0.39 | 54.97 |
| Huntington Bancshares | HBAN-Q | 7.13 | 12.24 | 65.55 | 0.71 | 1.28 | 2.01 | 31.13 |
| Suntrust Banks | STI-N | 18.76 | 11.2 | 66.52 | 0.81 | 2.96 | 0.72 | 44.95 |
| Comerica Inc. | CMA-N | 7.87 | 10.41 | 66.77 | 0.79 | 3.12 | 1.51 | 37.78 |
| Bank of America | BAC-N | 159.86 | 12.16 | 69.91 | 1 | 0.9 | 0.27 | 103.95 |
| Keycorp | KEY-N | 11.16 | 12.01 | 70.05 | 0.76 | 1.12 | 1.67 | 55.66 |
| Zions Bancorp | ZION-Q | 5.68 | 14.08 | 73.11 | 1.26 | 5.91 | 0.13 | 59.24 |
All currencies are local. Source: Bloomberg, Wickham Investment Counsel Inc.
Note the 1 year return is based on the US economy coming back and banks making money. Next year the returns are likely to much lower, but still healthy.
There are more questions than answers, till the next time – to raising questions.
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